The Future of Banking

Based on the adherence to the Chatham House Rules, no individuals nor companies will be identified by name.

A remote location near St. Andrews, Scotland, was a somehow ideal place for bankers and their technology bedfellows to discuss their common future, held under gray clouds and bad financial news brewing in nearby Ireland, and austerity protests in much of Europe. Except these bankers were 90% from Africa, Asia and the Middle East. The rare European and even rarer (expat) American, although often dominating the speaking space, added little to the reality of those who attended. Underlining this fact was a Kenyan banker who announced a 36% yearly profit or an Indian CEO expanding internationally taking the stage just after a gloom and doom American analyst or frankly depressing former Central Bank representative from the West.

Will the emerging market economies be able to sustain this optimism or will yet another wave of crisis hit those markets as well? Or had they learned from the '97 crisis (bankers from countries such as Thailand helped to put that crisis in perspective) and were thus in better shape to deal with any new ones to come? And is this crisis in the West not a kind of karmic payback for that '97 Asian Financial Crisis, without which China and much of Asia would have already been much stronger? Africa, without violence, famine and AIDS too would have risen up as a financial leader much earlier. At last these parts of the world, where the majority of the poor, those Bottom of the Pyramid citizens of the world, were seeing a brighter future. Our crisis in the West should not be hindering their prosperity, nor should globalization force those who have begun pulling themselves out of dire poverty, fall back because of rising food prices or debts to the IMF and World Bank. Ironically those same countries, which were told they could not bail out their own banks when times became rough, have been watching closely as the US bailed out its own banks. This kind of hypocrisy does not go down well. I doubt that kind of advice will be listened to again. Yet one hopes they do not follow in our Western footsteps and that regulations will indeed hinder the kind of hyper-speculation and virtual splicing, bundling and reselling of thin air.

Ironically we ran into an old friend who had been an executive at a large bank in the US (which had failed) who happened to be vacationing, golfing in St Andrews. When he found out we were attending a banking conference he asked questions, and the answers we provided demonstrated that not all was gloom and doom. The demographic charts showed the aging US and Europe while most of the developing world has young populations that are energetic and entrepreneurial... and which can trade with one another. In other words, speaking from a US perspective, in some ways, they simply do not need us. The former banker friend went on to work with manual laborers and has been questioning the way things were done in the past. He witnessed firsthand how cheap credit and over-expansion brought down a once strong economy.

And though the first evening a former Irish rock star turned philanthropist and humanitarian took the stage to address and scold those he perhaps believed to be a Goldman Sachs and City crowd, the reality was that I spent much of the free time discussing with Indian, African and expat US bankers, about the good being done by banking the unbanked, how technology could help speed up that process, and how the BRIC economies were not looking towards their Western colleagues for how to build their economies, but rather trying out new architectures and customer-focused approaches that we in the West would be wise to learn from and implement. Microcredit, women, microsavings were all discussed with bankers who all focused on the human needs in their countries. I was impressed time and again that they did not ignore these difficult topics but were extremely straightforward. I was also frankly shocked as I spoke to several expat American former bankers and analysts who had seen the crisis coming and has moved to Australia and other parts of the world. All of them stated they had done so to ensure their children a better future. WE in the West are now finding ourselves having to stare poverty in the face as much of our population is suffering and without work.

There was talk of the end of banks as we know it, mobile banking and bank branches in a box, but also maintaining a human connection and knowing the customer. But the most exciting ideas came from ex-bankers or those who had been running big banks and who were focusing on funding projects and businesses created by women, or looking at how the poorest of the poor were fulfilling their financial needs via new technologies. African telecoms buying up banks, non-banks doing business that used to be monopolized by banks -- local investments in Africa and Asia were paying off.

But perhaps the most moving part of the event was the final evening, as we were bussed to a farm for a Scottish dinner and dance, accompanied by traditional music of the bagpipes and a farewell sendoff by the Scottish guards. As we stood there, bankers who came in many cases from former European, especially former British empire colonies, watching the cultural manifestation of a fading glory, I realized that the world has already changed, things will never be as they once were, and that is for the best. It is a new time. We need to learn from those we thought we were helping, as they will save us in the end.